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WTI bears look for a continuation to test $70.50

  • WTI bulls are in and have broken a 50% mid-reversal level.
  • If the bears were to commit, there would be prospects for a move towards $70.50.

The West Texas Intermediate, WTI, is currently trading at $71.93 and has ranged from a low of $71.03 to a high of $74.33. Meanwhile, comments from Russia’s oil minister, who said next month’s OPEC+ meeting was unlikely to end with further production cuts, have weighed on black gold.

As reported by Reuters, Russian Oil Minister Alexander Novak said OPEC+ was unlikely to make further cuts following voluntary cuts of more than 1 million barrels a day that took effect in early May.

The probability that OPEC will continue to cut just one month later is low. Signs of stronger demand should comfort bullish speculators,” ANZ Bank analysts said, adding that “Chinese demand is growing strongly as restrictions on international travel to China are eased. The surge in demand for gasoline in the US comes ahead of the US holiday weekend”.

For their part, TD Securities analysts explained that ”Saudi Arabia’s warning to short sellers succeeded in crushing CTA trend-followers, but only during one trading session. WTI and Brent crude oil prices are catching up on deteriorating commodity demand trends, after a large-scale short-covering program by trend-following algorithms provided sufficient compensation. big enough for prices to buck the trend.”

”With price action already turning around, CTAs are likely to aggressively recapture some short positions. In fact, we estimate that algos will add a whopping -21% of maximum size to their net short position in WTI crude, along with -11% in Brent. This flow will help lend credibility to the narrative of falling demand, as China continues to battle a surge in Covid-19 infections,” the analysts further explained.

WTI Technical Analysis

The bulls have closed in and are reaching a resistance zone, breaking a 50% mid-reversal level. If the bears were to commit, there would be prospects for a move towards $70.50.

Source: Fx Street

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